US property market reaching Great Depression levels, chief economist warns
Residential real estate values in the US have seen a near unprecedented decline with prices falling for the 17th consecutive quarter, according to new figures,
Property values are now 25% below their June 2006 peak and the current real estate downturn is approaching Great Depression era declines when prices fell 25.9% in five years, says the latest Zillow Real Estate Market Report.
Home values fell from the second to the third quarter in 77% of markets covered in Zillow’s report. In five of those markets, Los Angeles, San Diego, San Francisco, San Jose and Ventura, home values began to fall again after five consecutive quarters of increases. Other markets that showed signs of stabilization in previous quarters also faltered, with home values flattening or becoming negative in Boston and Denver.
‘While not unexpected, the unceasing declines in home values signal that we’re in for a long, bleak winter of continued troubles for the housing market,’ said Zillow chief economist Stan Humphries.
‘The length and depth of the current housing recession is rivalling the Great Depression’s real estate downturn, and, with encouraging signs fading, will easily eclipse it in the coming months,’ he added.
The report also reveals a depressing situation on equity and repossessions. Nearly a quarter, 23.2%, of single family homeowners with mortgages, were underwater on their mortgage in the third quarter, the highest it has been since Zillow began tracking negative equity in 2009, the report also shows. It rose from 22.5% in the second quarter.
In some markets, as many as four out of five single family homeowners with mortgages were underwater on their mortgages in the third quarter. Las Vegas had the highest percentage, with 80.2% in negative equity, followed by Phoenix with 68.4%. In total, 11 markets tracked by Zillow had negative equity above 50%.
‘The high percentage of homeowners in negative equity continues to be troubling, in that it represents a huge number of people who are not only more vulnerable to foreclosure, but who are essentially trapped in their current homes and are prevented from selling and buying a new home. This has profound implications for future demand and will be a millstone around the neck of the housing market,’ explained Humphries.
As home values continue to fall, additional signs of trouble have emerged. Foreclosures reached a new all time peak, with 1.2 out of every 1,000 homeowners in the country losing their homes to foreclosure in September. Sales of homes previously foreclosed in the past 12 months reached a near- peak level in September, with foreclosure re-sales making up more than a fifth, 20.1%, of all sales. The last time foreclosure re-sales reached similar levels was in March 2009, when they made up 20.5% of all sales.
Additionally, more than a quarter, 27.3, of homes sold in September were sold for a loss, marking a near peak level. Homes sold for a loss peaked in February 2010, with 27.7%.